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CIMA - F1 > 8. Statement of Cash Flows > Flashcards

8. Statement of Cash Flows Flashcards

1
Q

What are 2 reasons why profits may differ from cash flows?

A
  1. Certain items are charged against profit even if there is no cash effect e.g. deprn
  2. Cash flows are not affected by an entity’s choice of accounting policies or by accounting estimates
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2
Q

What are the 4 benefits of the statement of cash flows?

A
  1. Links the P&L to the opening and closing SFP
  2. It is easier to understand than the SFP
  3. Less easy to manipulate than the P&L
  4. Enhances the comparability of financial statements
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3
Q

What is the IAS concern with the statement of cash flows?

A

IAS 7

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4
Q

What is cash?

A

Cash on hand and demand deposits

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5
Q

What are cash equivalents?

A

Short term, highly liquid investments that are readily convertible to cash - less than 3 months maturity

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6
Q

What are operating activities?

A

Principle revenue producing activities

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7
Q

What are investing activities?

A

Acquisition and disposal of non-current assets and other investments not included in cash equivalents

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8
Q

What are financing activities?

A

Those which result in changes in the size and composition of the equity capital and borrowings of the entity

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9
Q

What does the indirect statement of cash flows begin with?

A

Profit before tax from the P&L

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10
Q

In cash flows from operating activities, how do you adjust for depreciation?

A

Add back

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11
Q

In cash flows from operating activities, how do you adjust for loss on disposal of PPE?

A

Add back

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12
Q

In cash flows from operating activities, how do you adjust for investment income?

A

Take away

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13
Q

In cash flows from operating activities, how do you adjust for interest expenses?

A

Add back

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14
Q

In cash flows from operating activities, how do you adjust for an increase (decrease) in receivables?

A

Take away (add back)

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15
Q

In cash flows from operating activities, how do you adjust for an increase (decrease) in inventories?

A

Take away (add back)

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16
Q

In cash flows from operating activities, how do you adjust for an increase (decrease) in payables?

A

Add back (take away)

17
Q

In cash flows from operating activities, how do you adjust for interest paid?

A

Take away

18
Q

In cash flows from operating activities, how do you adjust for income taxes paid?

A

Take away

19
Q

In cash flows from investing activities, how do you adjust for purchase of PPE?

A

Take away

20
Q

In cash flows from investing activities, how do you adjust for proceeds from sale of equipment?

A

Add

21
Q

In cash flows from investing activities, how do you adjust for interest received?

A

Add

22
Q

In cash flows from investing activities, how do you adjust for dividends received?

A

Add

23
Q

In cash flows from financing activities, how do you adjust for proceeds from share issue?

A

Add

24
Q

In cash flows from financing activities, how do you adjust for proceeds from long term borrowings?

A

Add

25
Q

In cash flows from financing activities, how do you adjust for dividends paid?

A

Take away

26
Q

What 3 categories do we adjust for in cash flows from operating activities?

A
  1. Non cash items (e.g. deprn, profit/loss on disposal)
  2. Items elsewhere/accrued (e.g. interest)
  3. Changes in working capital
27
Q

What 4 pieces of information on a non current asset might you have in a statement of cash flows, and where do they fall?

A
  1. Deprn (op profit before working captial)
  2. Profit/loss on disposal (op profit before working captial)
  3. Cost of new assets (cash flows from investing)
  4. Proceeds on sale of NCA (cash flows from investing)
28
Q

What is included in cash flows from financing activities?

A

Proceeds from share and loan issue, repayments of borrowings/shares, dividends paid

CIMA - F1 (15 decks)

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